Article: ASKUL targets B2C sales

Japan
| 04 September, 2015

The investment by Yahoo! JAPAN in 2011 allowed Askul to invest 21.8 billion yen (€160 million) in logistics centres in Tokyo and Osaka. The efficiency of the warehouse allows orders made before 10am to be delivered by the end of the day.

“LOHACO is one of the ways we have responded to the growth of Amazon in Japan and the challenge of the internet to traditional Japanese resellers,” says Haruaki Sato, General Manager, Finance & Corporate Communications. “ASKUL has always successfully competed with new arrivals in the office supplies market, such as Office Depot in 2001. We achieved this in the past by maintaining customer loyalty and expanding the product range. Amazon is now the leader in the B2C market in Japan, which is approximately ten times larger than the B2B sector. One in three companies in Japan is already a customer of ASKUL, so as a reseller we sought further growth opportunities in a new market. We decided that the best opportunity to grow was by entering the fast-growing consumer e-commerce market. This resulted in joining forces with Yahoo! JAPAN, which is the most popular search engine in the country. Yahoo now owns around 42% of ASKUL’s shares through its investments in the company. It allowed us to place a link for the LOHACO shopping website on the Yahoo homepage in a prime position next to the news. This has created enormous traffic to the website.”

Sales up 64.7% in 2014
The focus on this new market has been successful for ASKUL. LOHACO sales grew by 64.7% in the fiscal year ending May 2015. B2C sales now account for about 10% of group turnover.
So, what makes LOHACO different from Amazon? “LOHACO is a second generation internet business, which means that we sell everyday items,” explains Sato. “It is a concept coined by our President Mr. Iwata himself to differentiate the business from Amazon and its main Japanese competitor Rakuten, which we call first generation companies. Their sales derive from one-off items such as books and televisions. Apart from perishable food items, LOHACO can supply individuals and families with most of their daily products such as coffee, bottled water and toilet paper. These items are often bulky to carry home from traditional shops.”
The main target group for LOHACO is women in their 30s and 40s, an age group that has little time for shopping between work and family commitments. The service is most popular in the high density areas of Tokyo and Osaka, where fewer families have cars compared to 10 years ago. LOHACO very often organises round table discussions with this target group to examine which products and brands they are most interested in. The popularity of mobile devices and high internet speeds has helped make the service successful.Research shows that customers often start by buying basic items such as bottled water and then gradually try new categories, making 6-7 orders a month.

B2C sales help drive B2B
LOHACO has also helped ASKUL boost its B2B business due to synergies and economies of scale. Sales growth in B2B was 6.4% last year, driven by MRO (Maintenance, Repair and Operation). With the market for traditional office supplies remaining flat in Japan, ASKUL has looked outside of the office space over the last decade. It now caters to the needs of warehouses, hospitals and construction sites. “Nobody refers to ASKUL as a stationery company anymore,” says Mami Usui, Manager Corporate Communication. “The investment by Yahoo! JAPAN has allowed us to invest 21.8 billion yen (€160 million) in logistics centres in Tokyo and Osaka. They have helped us shorten the supply chain by removing many third party trading companies. We buy directly from over 800 vendors. Our long relationship with suppliers such as The Procter & Gamble Company of Japan Limited., 3M Japan Ltd. and Nestlé Japan Ltd. was important when developing a range adapted to consumers. However, some of the products they proposed for B2C have been successfully incorporated into B2B, which has helped increase sales. The brands we work with have been very positive about LOHACO. For example, the breakfast and snack brand Granola, has the equivalent sales of 1,000 supermarkets on our platform. The vendors deliver directly to our warehouse, where we have a system called ‘efficient customer response’ in place. This means that orders are passed to the warehouse in 20 minutes and grouped together to send. This is one of our strong points, and used for both B2B and B2C. Amazon orders often come from different companies, so shipping is more expensive. The efficiency of our warehouse allows orders made before 10am to be delivered by the end of the day. Delivery is free of charge for orders of 1900 yen (€14 euros). The larger warehouses allowed us to increase the number of SKUs to 70,000. The average Japanese supermarket carries approximately 20,000 SKUs and convenience stores 3,000 so we have a much wider choice.”

A multi-channeled future
Haruaki Sato is confident that LOHACO will continue to gain market share as more and more consumers turn to the internet to buy their daily essentials: “LOHACO will increase its share of sales in the ASKUL group because it has the most potential. Despite the massive sales growth over the last 3 years, we are still relatively unknown among consumers. We are continuing to promote brand recognition to bring LOHACO to the same level as ASKUL, which is very well known in Japan. We see our future as both a B2B and B2C supplier.”